Replies to post #69 on Pine Valley Mining (PVMCF)

[SeriousMoney]

Closed down my CHK sometime back and XEC more recently. Made a bundle on both. As a group, my remaining energy is up very nice. Probably need to take some more off the table though. JC's "Pigs get slaughtered!" keeps ringing in my ears!

Gonna take a real hard look at EIA energy forecast and weather forecast. Know any indian snow dances?

Don't want to get caught holding the bag... or in it!

[arconway]

One Indian/Canadian/US company I am holding is GGR. Check it out.

[SeriousMoney]

What is happening is only half the story!



How much of what is the real killer!



Knowing how much of what before everyone else is .....

[SeriousMoney]

Energy's Correction May Be Temporary
By DIMITRA DEFOTIS, BARRON's Online, 11/10/05

ENERGY STOCKS HAVE BEEN THE FATTED CALF in portfolios this year. Yet their selloff in October may create some buying opportunities.

Oil prices have tumbled 17% from their peak during Hurricane Katrina, and energy stocks in the Standard & Poor's 500 index have followed suit. They've dropped roughly 10% from their mid-September high, seriously underperforming the broader index's flat returns, according to Thomson Financial/Baseline.

But the fundamental case for strong oil prices -- and higher energy stock prices -- remains: Global oil supplies are tight and demand is strong.

That should support a 2006 average crude-oil price in the mid-$50s, around the current price, which slid to roughly $58 per barrel Thursday.

Since energy companies can make good money at those prices, some stocks, including Burlington Resources and Chevron, now look like bargains. They're well off their highs and have low multiples and decent growth prospects to boot.

"I want to take advantage of other peoples' fear and greed," says William Gerlach, lead manager of the Gartmore Global Natural Resources Fund. "Some energy stocks went down 20% to 25% in October, and I thought that was overdone."

Next year, according to Thomson First Call, Wall Street analysts expect oil prices to average about $56 per barrel and fall no further than $46 (see Weekday Trader, "Cheaper Oil May Not Sink Energy Stocks," Sept. 22).

"Nothing has changed,'' says Francisco Blanch, a senior commodities strategist at Merrill Lynch in London. "Production growth is still heavily constrained, refining capacity is limited, and it will take several years to clear the bottlenecks."

He thinks that if oil prices fall below $55 per barrel, "it is not a bad time to get in" to energy stocks again.

That price is well below crude's multiyear high near $70 per barrel in late August as Hurricane Katrina hit land. Approximately 40% of oil and gas production in the Gulf of Mexico remains shuttered because of hurricane damage, according to Bruce Lanni, an analyst at A.G. Edwards & Sons.

This week the International Energy Agency said supply constraints could keep oil near current prices through 2010 and force them above their recent peak by 2030 (see The Wall Street Journal, "Energy Agency Sets Grim Oil Forecast," Nov. 8).

And demand remains strong: China's gross domestic product (GDP) is rising at nearly 9% a year, and third-quarter U.S. GDP growth was an annualized 3.8% despite the big spike in gasoline prices.

"A number of companies produced good results [and] talked about expansion into new basins for exploration, [yet] the stocks went down," says Gerlach. "That strikes me as silly."

One company he likes is Burlington Resources, an oil and gas exploration and production company whose shares have fallen roughly 20% from their 52-week high.

Burlington is one of the largest producers of North American natural gas. Natural gas prices, near $11.40 per million British thermal units, have soared well beyond their historic averages.

Yet at only about 8.3x estimated earnings for the next four quarters, Burlington's shares look cheap compared with its median 13x forward earnings over the last five years, according to Thomson Financial/Baseline (see At a Glance).

Even if oil prices fell to $50 again, companies would have enough cash to grow, says Frederick Sturm, manager of the Ivy Global Natural Resources Fund.

"It is altogether possible for the commodity prices to go down and stay down from recent highs, but the companies to go on to new highs," Sturm says.

He likes Chevron, the integrated oil and gas exploration and refining company whose shares have fallen about 14% from their 52-week high.

In fact, Chevron's stock has stalled following its August merger with Unocal. But Sturm believes the combined companies offer more value than the current stock price reflects.

Chevron fetches roughly 7.3x forward earnings, a nice discount to the 8.4x forward multiple at which other integrated oil and gas companies in the S&P 500 trade, according to Baseline (see At a Glance).

Of course, investors may continue selling energy stocks if crude-oil prices fall, mostly because of worries that global economic growth could slow, which would reduce demand.

That's why Michael Rothman, head of energy research at ISI Group, thinks oil prices eventually could settle at $40 per barrel, lower than the consensus,.

"Is this a buying opportunity?" asks Rothman. "I don't think that it is the right time yet. I expect further weakness in oil prices, and the stocks are trading off of oil prices."

And if a cold winter pushes heating costs higher, that, too, could slow economic growth, ease energy demand and send crude back below the $50 threshold.

But no matter what happens in the short run, the supply of oil and natural gas is limited and overall demand is growing.

That's why as the business cycle waxes and wanes, spending on oil and gas exploration, related services and refined products should remain strong -- and help energy stocks bounce back, too.

http://online.barrons.com/article/SB113163009289193515.html?mod=9_0030_b_online_exclusives_weekday_r...

[SeriousMoney]

China Continues To Fill Up on Oil, But Pace Slackens
Some Forces That Fueled Surge in Demand Dissipate As Local Bottlenecks Ease
By PATRICK BARTA, THE WALL STREET JOURNAL, November 9, 2005

BEIJING -- Two years after China emerged as the world's biggest source of new oil demand, its thirst for petroleum has slackened, a development that could mean it will put less strain on global oil markets in the future.

Last year, China's breakaway economic growth -- and its burgeoning appetite for more cars, factories and power plants -- accounted for about 30% of the world's new consumption of oil. This spike in demand, which was generally unexpected, played a major role in driving up global oil prices and causing the world's car owners pain at the pump.

This year, Chinese oil imports have slowed significantly, and there is mounting evidence that the remarkable demand surge of 2004 was exaggerated by factors that are fading or might not recur. If China's thirst can be quenched with less foreign oil, the global supply system may get more breathing room to cope with sudden shocks like Hurricane Katrina. It also would mean that other factors, such as tight refinery capacity in the U.S. or elsewhere, would exert more influence over oil prices over the next several years.

China's more than 15% growth in oil demand last year was "an aberration," says Leo Drollas, the chief economist at the Centre for Global Energy Studies in London. "No country could have oil growing at that rate for long periods. Otherwise we'd have all of the world's oil going to China."

Lee Raymond, chairman and chief executive of Exxon Mobil Corp., said in an interview yesterday that U.S. politicians are unfairly blaming China for high oil prices. "Washington has to demonize somebody," and in Washington's current view, "the demon in the oil market is China," Mr. Raymond said. But blaming China alone for today's oil price, he added, is "malarkey."

In the past year, he said, the increase in oil demand in the rest of Southeast Asia, excluding India, was about equal to the increase in China. "It's the world," Mr. Raymond said. "Welcome to the world."

Though most market watchers were caught off guard by last year's steep run-up in China's oil demand, Mr. Raymond said that its consumption growth has been generally in line with industry expectations. "Speculation" accounts for about $20 of the current per-barrel price of oil, Mr. Raymond estimated. "The fundamentals" of supply and demand, he said, "support something like $35 or $40." The Exxon chief said that, in about a decade, it will be likelier that oil prices will be below $35 than they will be to stay at today's level of about $60 a barrel.

The price of oil, which peaked at $69.81 a barrel on Aug. 30 has moderated in recent weeks and closed yesterday at $59.71 a barrel, up 24 cents, in New York futures markets.

Of course, there's little doubt that China, followed by India, will remain a major force in the global energy market. Indeed, most analysts expect Chinese oil demand to rebound somewhat next year as the country draws down old stockpiles and possibly starts building a strategic petroleum reserve, similar to the one maintained by the U.S.

Few expect China's demand growth to return to its 2004 pace. The easing of electrical-power shortages in China this year has kept many Chinese businesses from having to resort to last year's solution of using diesel oil to fuel their operations. In addition, tighter credit and the highest local gasoline prices ever appear to have damped a boom in Chinese auto sales. There also are indications that China's oil companies are succeeding in boosting domestic production, a surprising success that may further offset the country's need for imported oil.

This year, China is on track to account for about 16% of the world's new oil consumption, little more than half last year's share. The Centre for Global Energy Studies estimates that Chinese demand will rise by about 230,000 barrels of oil a day this year -- a large increase, but a far cry from the 860,000-barrel-a-day jump of 2004 and a much more manageable pace for global suppliers.

China made such waves in global oil markets last year partly because its oil-demand growth startled suppliers by sharply outpacing the country's economic growth. A country's oil demand typically grows at about the same rate as gross domestic product, or even slower in more mature economies. But China's oil demand shot up 15.4%, while GDP rose 9.5%. Some oil traders concluded that disparity would persist, fed by decades of pent-up demand for cars and industry.

This year, China's economic growth is running at roughly the same rate as last year's. But many economists believe that the composition of that growth has changed, with activity easing in many of the industries that consume large amounts of fuel, such as aluminum production. The shift follows moves by the Chinese government to tighten credit and impose other restrictions in an effort to rein in overheating industries.

Many economists believe that China's oil demand may become more predictable over time, settling more into line with the country's high-single-digit rate of economic growth. Some skeptics, however, believe oil demand will keep outstripping economic growth by a wide margin -- and possibly wreak havoc on global markets again. China's murky economic data and opaque policy-making make it especially difficult to forecast Chinese demand with confidence, raising the risk that forecasts of slower demand growth could prove wrong.

But for now, many analysts in China are concluding that the surge in local demand last year reflected a perfect storm of forces, some of which are now retreating, or at least probably won't recur at the same time.

In 2003 and 2004, economic growth rocketed higher as a raft of new projects got under way in anticipation of the 2008 Beijing Olympics. Car sales also heated up and unexpected bottlenecks emerged throughout the economy, especially along rail lines and at power plants, forcing companies to use less fuel-efficient means to get work done.

Many of the bottlenecks -- particularly the tight power situation -- are easing. According to Deutsche Bank data, China suffered a net deficit of about 35,000 megawatts of power in 2004, bigger than the entire power grid of some sizable countries, such as Chile.

The shortfall forced factories, hotels and other businesses to switch to diesel generators in a desperate scramble to keep their operations running. David Hurd, Deutsche Bank's head of Asian oil and gas research, figures that trend accounted for about 20% to 25% of China's new oil demand last year.

This year, China's power deficit has declined as more power plants come online. In the next two years, Deutsche Bank estimates, the country should wind up with a sizable surplus of power -- all but eliminating the need for the diesel generators.

This is already evident at some factories. At Wanfeng Auto Holding Group, a giant aluminum-alloy wheel maker in Zhejiang province, plant officials say they had to buy four diesel generators last year as backup in case power supplies fell short. Power did fall short, forcing the company to burn up some 1,800 tons of diesel. This year, however, the electricity shortages haven't been nearly as bad. Wanfeng has only had to use its generators for one month, allowing it to pare back diesel consumption by nearly 70%.

"Our spending on diesel is much less this year," says Gong Weipeng, a company official responsible for equipment maintenance. "It's a good relief of financial pressure."

A similar trend is evident at power plants themselves, which also turned to diesel generators when they couldn't get enough coal to keep their operations running at full tilt. At Leiyang Power Plant, the biggest coal-fired power plant in Hunan province, officials had to use 1,000 tons of diesel because railway bottlenecks and other problems prevented good-quality coal from reaching the plant. Since late March, the situation has improved greatly, and factory officials now estimate they won't need to use extra diesel later this year or next.

As the power situation improves, there are signs Chinese consumers are also changing their behavior to cope with high oil prices, though it's hard to know if those changes will endure. The Chinese government caps gasoline prices to prevent the full impact of high oil costs from flowing through to consumers. Even so, it has allowed prices to rise some 29% since the beginning of last year, pushing retail prices to their highest level ever in China.

Car sales have slowed, with those consumers who are buying more often choosing vehicles with smaller, more fuel-efficient engines.

The Chinese government is promoting the fuel-efficiency trend. When visiting a Honda plant in China in September, Chinese Premier Wen Jiabao sat in a Honda Fit, a small, relatively fuel-efficient model, partly as a symbolic gesture to encourage Chinese consumers to buy smaller cars. The government has also tightened credit affecting auto purchases, which in turn has forced some consumers to seek out less-expensive cars that tend to be fuel efficient.

The number of vehicles sold in China with engines larger than 1.6 liters fell 3.7% from a year earlier during the first nine months of the year. Sales of smaller-engine cars have kept climbing.

Xing Chuang, a sales manager with Beijing Huizhongtong, a car dealer for Volkswagen brands, says that now "almost every" car buyer asks questions about fuel efficiency, including about gas mileage in city traffic compared with rural roads. He says sales of small cars now account for about two-thirds of the total at his dealership, compared with only half last year.

As these consumption trends play out, China also is getting some relief on the supply side. Until the early 1990s, China was able to supply all its own oil, but that ended as production leveled out. The country's dominant oil field, known as Daqing, has already peaked. But last year, Chinese crude production rose 3%, and the pace has picked up since then. Production was up 4.4% from a year earlier during the first eight months of 2005.

The trend is even more pronounced in China's booming natural-gas sector, which saw production shoot up 19% last year, though overall output remains small compared with gas giants like Russia or the U.S.

The increases reflect increased capital spending by domestic oil companies, which have reopened some wells they shuttered back when oil prices were lower. The gains are particularly strong at Yanchang, an oil field dating back to 1907 that is now owned by several local governments in Shaanxi province. Until recently, output there was falling, but last year, its production rose more than 20%.

--Ellen Zhu in Shanghai, Cui Rong in Beijing and Jeffrey Ball in New York contributed to this article.

http://online.wsj.com/search

[SeriousMoney]

Toby on energy 11/11/05

ENERGY PRICES

We corrected down to the $57 per barrel 200-day trading range for oil and held. We traded down within $1 above the 200-day trading range of the Energy Select SPDR (XLE) and held our ground there, too.

Natural gas is a different matter -- the supply-demand imbalance is not the same as the one for oil.

The cold weather we've forecast is whooshing into the Midwest and heading for the East Coast, which will put the bottom here for energy around $57 for oil and around $11ish for natural gas.

Now it's reasonable to expect that we could see an additional 10% correction -- say $52ish oil and $10ish natural gas -- if there's a big warm spell.

But the markets will tighten again as more and more hurricane
victims go back to their homes, driving levels return to normal and the gas heaters turn on big-time this weekend in the colder areas of the U.S.

So our strategy still makes sense:

1) Own energy drilling service companies with huge pricing power and earnings power locked in for the next two to three years.

2) Own energy exploration companies that emphasize natural gas and have drilling capacity to grow reserves 20%+ and cash flow 20%+ per year

3) Own strategic materials like coal, copper and iron.

Remember, unless oil goes to $36 and STAYS there for six months, our energy trusts do not cut a penny of their distributions.

Unless oil drops to $30 per barrel, NO drilling contracts are
canceled.

In a world where new gas or oil wells cost $10-$12 per barrel to find and another $10-$12 per barrel to extract, we have a floor on pricing around $42-$45 just on fundamentals.

Add in the premium for very little extra supply -- the surplus
amount that drives any commodity price up or down at the margin -- and you get a $52 oil/$9 natural gas price range.

And now that the terrorists know that they cannot affect the price of oil with the basic suicide bombing, they have to figure that escalating attacks on the energy infrastructure are the only way to impact the news cycle.

So our 40%-60% allocation to energy still makes economic and
financial sense. But we still have to be smart about entry points and taking profits off the table to build cash for reinvesting at the bottom of the ranges.

[SeriousMoney]

Energy blurp embedded in a recent teaser from Larry Edelson warning of higher inflation and collapsing bond markets.

Third, maintain your core positions in select natural resource investments. Energy. Gold mining. Select agricultural companies. Copper. Aluminum. And more. These are companies that deal in tangible assets that go up with rising inflation (not to mention the huge demand from Asia). The modest decline we’ve seen in oil, including this weeks, is little more than a blip on the screen in comparison to recent — and future — rises.

Haven't used his Interest Rate and Currency Trader service (very expensive), but regularly bombarded with his & Martin Weiss' teasers.